Pakistan’s tax-heavy budget goes into effect today ahead of IMF loan talks

Labourers load sacks of rice onto a truck at a market in Karachi on June 10, 2024. (AFP/File)
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Updated 01 July 2024
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Pakistan’s tax-heavy budget goes into effect today ahead of IMF loan talks

  • Pakistan’s parliament passed federal budget last week despite protests from opposition
  • Economists say budget in line with IMF recommendations, to help Pakistan secure bailout package 

ISLAMABAD: Pakistan’s tax-heavy $67.76 billion budget for the new fiscal year takes effect from today, Monday, which Islamabad hopes will prove instrumental in securing another bailout package from the International Monetary Fund (IMF) to stave off a macroeconomic crisis.  

President Asif Ali Zardari signed the Finance Bill 2024-25 into law on Sunday after the country’s parliament passed it last week amid an annual inflation projection of up to 13.5 percent for June. The bill comes ahead of more talks with the international lender for a loan of up to $8 billion to avert a debt default for Pakistan, the slowest-growing economy in South Asia.

The ambitious budget, with a challenging tax revenue target of Rs13 trillion ($46.66 billion) has drawn the ire of the government’s allies and opposition alike, who have demanded relief for the salaried class and the poor. The revenue collection target for FY25 is almost 40 percent higher from the last fiscal year, drawing criticism from the business community as well. 

“I have already said we are moving in a positive way,” Finance Minister Muhammad Aurangzeb said on Sunday, speaking about the fresh IMF program during a media interaction in the federal capital. “During July we should get into a good agreement.”

Pakistan began discussions about a new loan with IMF officials soon after completing a $3 billion program that helped the country stave off a sovereign debt default last year. The international lender sent its delegation to Pakistan in May to hold negotiations with the new government which did not materialize into a staff-level agreement. 

Pakistan has sought IMF loans in recent years due to a combination of economic challenges, including significant fiscal and current account deficits, declining foreign exchange reserves and rising public debt.

These economic vulnerabilities have been exacerbated by external shocks like fluctuating commodity prices and internal challenges such as political instability and policy inconsistency.

The government has maintained the country’s economy is on the mend but considers the new bailout important to ensure a substantial financial cushion.

TAX-LADEN BUDGET 

Pakistan’s finance ministry said in a report on Friday that the budget is gearing the country toward “an era of sustainable and inclusive growth.” It projected an annual consumer price inflation for June 2024 between 12.5 percent to 13.5 percent, up from 11.8 percent in May.

The rise in the tax target is made up of a 48 percent increase in direct taxes and a 35 percent hike in indirect taxes over revised estimates of the current year. Non-tax revenue, including petroleum levies, is seen increasing by 64 percent.

The tax would increase to 18 percent on textile and leather products as well as mobile phones besides a hike in the tax on capital gains from real estate. 

Workers will also get hit with more direct tax on income. Opposition parties, mainly parliamentarians backed by the jailed former Prime Minister Imran Khan, and top trade bodies have rejected the budget, saying it will be highly inflationary and lead to industry shutdowns. 

Pakistan’s central bank has also warned of possible inflationary effects from the budget, saying limited progress in structural reforms to broaden the tax base meant increased revenue must come from hiking taxes.

The upcoming year’s growth target has been set at 3.6 percent with inflation projected at 12 percent.


Pakistan smoking-related deaths surpass South Asia, global averages — survey

Updated 7 sec ago
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Pakistan smoking-related deaths surpass South Asia, global averages — survey

  • Pakistan’s annual rate is 91.1 per 100,000 people, with 80% smokers expressing desire to quit
  • Average death rate for South Asia is 78.1, while the global average is 72.6 per 100,000 people

ISLAMABAD: Pakistan’s annual smoking-related death rate of 91.1 per 100,000 people significantly exceeds both the South Asian and global averages, according to an analysis by Gallup Pakistan on Tuesday, based on the Global Burden of Disease 2024 report.
Smoking is often initiated at a young age in Pakistan, with many individuals beginning the habit during adolescence. Although laws exist to prevent the sale of cigarettes to anyone under 18 and prohibit sales near schools, enforcement remains weak.
The affordability of cigarettes further contributes to the easy accessibility of tobacco products for youth. Early initiation is additionally driven by peer pressure and the perceived glamor associated with smoking, despite restrictions on promotional activities.
“According to the Global Burden of Disease 2024, Pakistan reports an annual death rate from smoking of 91.1 per 100,000 people, notably higher than the averages for South Asia (78.1) and the rest of the world (72.6),” Gallup said.
“Between 1990 and 2021, Pakistan experienced a 35 percent relative decrease in smoking-related death rates, which is lower than the reductions achieved by India (37 percent), South Asia (38 percent), and the global average (42 percent),” it added.
Gallup also mentioned data from the World Health Organization, saying it showed that purchasing 100 packs of the most-sold cigarette brand requires 3.7 percent of the GDP per capita, significantly lower than India’s 9.8 percent and Bangladesh’s 4.2 percent.
However, cigarette affordability is still decreasing in the country, with the share of GDP per capita needed to buy 100 packs rising by 38 percent between 2012 and 2022 due to price increases.
Gallup also quoted its own 2022 opinion poll, saying 80 percent of smokers in the country expressed a desire to quit smoking.
 


Pakistan plot spin blitz as West Indies return after 19 years

Updated 37 min 12 sec ago
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Pakistan plot spin blitz as West Indies return after 19 years

  • Pakistan capitalized on home advantage when England came in October
  • West Indies last toured Pakistan in 2006, before a militant attack on visiting Sri Lanka team

MULTAN, Pakistan: Pakistan will look to formidable spin duo Noman Ali and Sajid Khan to torment the visitors when the West Indies play their first Test series in the country in 19 years from Friday.

Pakistan capitalized on home advantage when England came in October, tailoring pitches for slow bowling to snap a painful winless streak with a 2-1 victory.

Noman and Sajid played starring roles and are joined in the squad by Abrar Ahmed, hinting at a three-pronged spin assault in the two-match series in Multan.

The West Indies last toured Pakistan in 2006, before a militant attack on the visiting Sri Lanka team three years later scared off international sides.

Andre Coley is in charge of a West Indies team which has won only two of its last 13 Tests before he hands over the reins to white-ball coach Daren Sammy in April.

“It’s a new series, a new opportunity,” Coley told reporters as the team arrived last week.

“When you talk about Test cricket, it’s not only the opposition’s skill that provides tests, but the different conditions, different environments and different game situations.”

Pakistan selectors delivered victory against England by taking the bold decision to drop ace batsman Babar Azam and pace pair Shaheen Shah Afridi and Naseem Shah.

Left-arm spinner Noman and off-spinner Sajid shared 39 of 40 England wickets on pitches baked with patio heaters and dried with fans, clinching the series after losing the first match.

“We bounced back well against England,” said skipper Shan Masood of a series that salvaged his reputation after Pakistan lost their first six matches under his captaincy.

“With backs against the wall we did well. We need to learn how to land the first punch,” he said after his team suffered a 2-0 defeat in South Africa last week.

Azam has regained his place but Shaheen and Naseem remain out in a bid to manage their workloads.

Opener Saim Ayub is suffering from a calf injury sustained in South Africa and his partner Abdullah Shafique is dropped because of poor form, leaving the door open for the return of experienced Imam-ul-Haq.

To match Pakistan’s spin attack, the West Indies will deploy left-armers Gudakesh Motie and Jomel Warrican, as well as Kevin Sinclair.

Kemar Roach will head the pace attack in the absence of Shamar Joseph — out with a shin injury — and Alzarri Joseph who has opted to play T20 cricket in the UAE.

The second Test starts January 25, with the series deciding which team will finish bottom of the World Test Championship table.

Pakistan currently rank eighth and the West Indies ninth and last.

South Africa and Australia have already qualified for June’s WTC final at Lord’s despite Australia’s shock loss to the West Indies in Brisbane last year.

Squads:

Pakistan: Shan Masood (captain), Saud Shakeel, Abrar Ahmed, Babar Azam, Imam-ul-Haq, Kamran Ghulam, Kashif Ali, Khurram Shahzad, Mohammad Ali, Mohammad Huraira, Mohammad Rizwan, Noman Ali, Rohail Nazir, Sajid Khan, Salman Agha

West Indies: Kraigg Brathwaite (captain), Joshua Da Silva, Alick Athanaze, Keacy Carty, Justin Greaves, Kavem Hodge, Tevin Imlach, Amir Jangoo, Mikyle Louis, Gudakesh Motie, Anderson Phillip, Kemar Roach, Kevin Sinclair, Jayden Seales, Jomel Warrican


Pakistani security forces kill four militants in North Waziristan operation

Updated 15 January 2025
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Pakistani security forces kill four militants in North Waziristan operation

  • The intelligence-based operation was carried out against TTP militants in the Spinwam area
  • Pakistan’s army chief said this week security forces will continue targeted operations against TTP

KARACHI: Pakistani security forces killed four militants in an intelligence-based operation in North Waziristan’s Spinwam area, the military’s media wing, Inter-Services Public Relations (ISPR), said on Wednesday.

The operation comes amid a surge in militant violence in the northwestern Khyber Pakhtunkhwa (KP) province, which Pakistani authorities attribute to cross-border attacks by the proscribed Tehreek-e-Taliban Pakistan (TTP) from neighboring Afghanistan.

Officials have also accused the Afghan Taliban administration of facilitating these attacks, a claim Kabul has denied.

Pakistan’s army chief, General Asim Munir, told political stakeholders in KP this week that security forces were not planning a full-scale operation against the TTP but would continue targeted intelligence-based actions to counter the banned militant faction.

“On night 14/15 January 2025, Security Forces conducted an intelligence-based operation in general area Spinwam, North Waziristan District on reported presence of khwarij [TTP militants],” the ISPR said in a statement.

“During conduct of the operation, own troops effectively engaged khwarij’s location, and after intense exchange of fire, four khwarij were sent to hell,” it added.

Weapons and ammunition were recovered from the militants, who the ISPR said had been actively involved in numerous violent attacks on security forces and targeted killings of civilians.
Prime Minister Shehbaz Sharif commended the security forces for their efforts.

“The nation is proud of the fearless youth in our security forces,” Sharif said in a statement issued by the Prime Minister’s Office. “We remain determined to thwart the evil designs of the enemies of humanity and will continue to work toward eradicating terrorism from the country.”

The ISPR emphasized the operation underscored Pakistan’s commitment to eliminating militancy, adding security forces were determined to “wipe out the menace of terrorism from the country.”


Pakistan’s Imran Khan defiant even as longer sentence looms

Updated 15 January 2025
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Pakistan’s Imran Khan defiant even as longer sentence looms

  • The former prime minister can get 14-year prison term this month in the Al Qadir Trust graft case
  • Analysts believe the security establishment is using the sentence as a bargaining chip with Khan

ISLAMABAD: Imran Khan, Pakistan’s most popular politician, is facing a 14-year prison term this month in a case his party says is being used to pressure him into silence.
The former prime minister, long a source of frustration for the powerful military, has been in custody since August 2023 and faces a slew of legal cases he says are politically motivated.
A looming verdict for graft linked to a welfare foundation he set up with his wife, the Al-Qadir Trust, is the longest-running of those cases, with a verdict postponed on Monday for a third time.
“The Al-Qadir Trust case, like previous cases, is being dragged on only to pressure me,” Khan said this month in one of his frequent statements railing against authorities and posted on social media by his team.
“But I demand its immediate resolution.”
Analysts say the military establishment is using the sentence as a bargaining chip with Khan, whose popularity undermines a shaky coalition government that kept his party from power in elections last year.
“The establishment’s deal is he comes out and stays quiet, stays decent, until the next election,” said Ayesha Siddiqa, a London-based author and analyst on Pakistan’s military.
Analysts say the military are Pakistan’s kingmakers, although the generals deny interfering in politics.
Khan said he had once been offered a three-year exile abroad and was also “indirectly approached” recently about the possibility of house arrest at his sprawling home on the outskirts of the capital.
“We can assume from the delays that this is a politically motivated judgment. It is a Damocles sword over him,” Khan’s legal adviser Faisal Fareed Chaudhry told AFP.
“The case has lost its credibility,” he said, adding that Khan will not accept any deal to stay silent.
Khan has been convicted and sentenced four times in other cases. Two cases have been overturned by the Supreme Court, while judges have suspended the sentences from the other two.
The specialist anti-graft “accountability court” is set to announce the verdict and sentence in the welfare foundation case on Friday, two days after government envoys are scheduled to meet leaders from Khan’s Pakistan Tehreek-e-Insaf (PTI) party to ease tensions.
The PTI has previously sworn to refuse talks with a government its leaders claim is illegitimate, alleging the coalition seized power by rigging February 2024 polls.
They say they will only take part if political prisoners are released and an independent inquiry is launched into allegations of a heavy-handed response by authorities to PTI protests.
Otherwise, Khan has threatened to pull his party from the negotiations and continue with a campaign of civil disobedience that has frequently brought Islamabad to a standstill.
The most recent protests flared around November 26, when the PTI allege at least 10 of their activists were shot dead. The government says five security force members were killed in the chaos.
“The government would like to appear legitimate, and for that they need PTI to sit down in talks with them,” said Asma Faiz, associate professor of political science at Lahore University of Management Sciences.
“Ideally, they would be looking to offer some relief to Imran Khan and his party to appease the domestic and international criticism,” she told AFP.
For now, it appears to be a stalemate, said Michael Kugelman, South Asia Institute director at The Wilson Center in Washington.
“The army might be willing to give Khan a deal that gets him out of jail, but Khan wouldn’t accept the likely conditions of his freedom,” he told AFP.
“Another problem is I can’t imagine the government agreeing to an investigation of November 26. But PTI won’t budge on that demand.”
A stint in exile is common in the trajectory of political leaders in Pakistan who fall out of favor with the military and find themselves before the courts, only to return to power later.
Three-time prime minister Nawaz Sharif served only a fraction of a sentence for corruption, spending several years in London before returning to Pakistan in late 2023.
Former and current president Asif Ali Zardari moved to Dubai after his party was rebuked by the generals.
Both men are now considered the chief architects of the ruling coalition.
But exile might not fit with the carefully worked image of Khan, whose political rise was based on the promise of replacing decades of entrenched dynastic politics.
“I will live and die in Pakistan,” Khan said in a statement shared by his lawyers. “I will fight for my country’s freedom until my last breath, and I expect my nation to do the same.”


Government approves revised deals with 14 independent power producers to reduce electricity costs

Updated 15 January 2025
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Government approves revised deals with 14 independent power producers to reduce electricity costs

  • Revised contracts will save the government about $5 billion over their duration, benefiting consumers
  • Revised agreements will also include a $126 million cut in the profits reaped by these IPPs in the past

ISLAMABAD: Pakistan’s federal cabinet on Tuesday approved a plan to renegotiate agreements with 14 independent power producers (IPPs), a move aimed at lowering electricity costs and addressing the country’s mounting circular debt crisis, according to a government statement.

The issue of IPPs, dating back to agreements signed in the 1990s and 2000s, gained prominence recently amid soaring inflation and public discontent over high electricity prices.

At the core of the problem are capacity charges, or payments made to IPPs regardless of electricity consumption, which have exacerbated Pakistan’s circular debt, now exceeding Rs2.4 trillion ($8.6 billion), as per the energy minister Sardar Awais Ahmad Laghari.

“These revised agreements, finalized after negotiations with 14 IPPs, propose a reduction of Rs802 billion ($2.9 billion) in costs and profits, including a Rs35 billion ($126 million) cut in past excess profits,” the statement said, adding the revised contracts will save the government Rs1.4 trillion ($5 billion) over their duration, translating into annual savings of Rs137 billion ($493.2 million) for consumers.

The renegotiated deals include 10 IPPs established under the 2002 policy and four under the 1994 policy, with one 1994 agreement terminated altogether.

The government’s renegotiation efforts, also influenced by International Monetary Fund reform recommendations, seek to reduce tariffs and capacity payments to ease fiscal pressure.

Prime Minister Shehbaz Sharif was also quoted in the statement as describing the revised agreements as significant achievement.

“These settlements will not only save the national exchequer but also help eliminate circular debt and reduce electricity prices,” he said.